Re: Corn Prices

Originally Posted by Leopold

Corn prices are pretty much irrelevant to the cost of goods equation for distillers. Especially when we're talking about the older, pricier bottles that you folks prefer. The glass bottle is more of a cost than the corn for many whiskey distillers.

Yes, but it does provide an opportunity to raise prices and blame it on the increase in the price of corn.

Re: Corn Prices

As Tom says, the bottle costs more than the corn, to which I would add that the taxes are more than the corn and bottle and every other production expense combined.

I would also point out that except for commodities, price has nothing to do with cost. One of the biggest myths people have about business is that businesses calculate their costs, add a profit factor, and that's their price. Very few businesses price their products or services that way. Pricing is based almost solely on what the market will bear. If the price the market offers you is less than your costs, then you have a problem, but that's different than using cost to set prices.

Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

Re: Corn Prices

Originally Posted by cowdery

Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

According to my "learning" at the Simon School of Business [at the U of R ] ... a very true statement ... consumer's pay what they feel the product is worth and producers price their product based on what maximizes their profit ... nothing more.

Re: Corn Prices

Most major food companies have their input costs hedged in the futures market, and I assume the alcohol producers do the same. This can be done effectively out about 18 months, so there shouldn't be a shock to the bourbon marketplace anytime soon. If you like cheap beef, that's another story.

Re: Corn Prices

I agree with what Leopold and Chuck said. We are seing increases. We run bourbon one month and rye the next. I have seen about a 10 percent increase in the cost of the corn each load I have got this month, 3 so far. Another interesting thing around here is, as we are buying barley to have malted right now, barley price are shooting up due to some of the farmers are going to use it to feed cows wth instead of corn. We pay a premium for good grain to start with. We make a pile of fruit based liqors and fruit prices are through the roof. Cider is expected to double in price. Stuff like that will increase prices.

Re: Corn Prices

Originally Posted by cowdery

Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

Re: Corn Prices

Originally Posted by cowdery

Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

The only reason a hamburger at McDonalds is 89 cents is because they think that's all they can get for it.
If they could sell them at $100.00 each they would.
Also us consumers bear a good amount of blame for high prices and poor service.
Everytime we buy something we are saying to the company that produces it, "it's a fair price and a good product."

Re: Corn Prices

Also us consumers bear a good amount of blame for high prices and poor service.
Everytime we buy something we are saying to the company that produces it, "it's a fair price and a good product."

Totally agree. No consumer is ever a passive victim of unilateral business practices; consumerism is a two way street.

Originally Posted by OscarV

The only reason a hamburger at McDonalds is 89 cents is because they think that's all they can get for it.
If they could sell them at $100.00 each they would.

This case actually, I think, shows a key limitation of Chuck's very good and necessary point. McDonald's could charge more than 89 cents for a hamburger (not $100, but statistically much more). Actually, I have it on good information that McDonalds LOSES money on their 99 cent McDoubles. That damn fake cheese is actually kind of expensive (hence, 1 slice of cheese for a double!). People would pay 10-15 cents more, and McDonalds would make A LOT of money in the short term (billions served, remember?). But they have calculated that keeping prices low on certain items actually increases their market share and, therefore, allows them to make more money over the long term (on other products - think Chicken Selects and the slushie of the year). More people walk in, more money is ultimately made. Advertising, presentation, and 99 cent burgers all cost McDonalds a lot of money up front, but if they win the company more market share, it's all worth it in the end.

So. It is completely true that commodity prices account for a fraction of the cost of business in the 1st world (especially for luxury products), and it is completely true that the market, not the costs, determine the sticker price of products in such business. But in 1st world markets which can bear prices that have almost no relationship to commodity costs, there is always TONS of competition for market share, and competing for market share does cost a lot of money / energy. In many ways, then, when we pick one whiskey over another, we are subsidizing an increased market share for the company that produced it. It's kind of annoying to think that some of what we pay does not go into the production itself, but increasing the market share for companies that we think make better whiskey is pretty decent consolation.

Re: Corn Prices

Originally Posted by Special Reserve

Yes, but it does provide an opportunity to raise prices and blame it on the increase in the price of corn.

Originally Posted by OscarV

The only reason a hamburger at McDonalds is 89 cents is because they think that's all they can get for it.
If they could sell them at $100.00 each they would.
Also us consumers bear a good amount of blame for high prices and poor service.
Everytime we buy something we are saying to the company that produces it, "it's a fair price and a good product."

Originally Posted by cowdery

Pricing is based almost solely on what the market will bear.

Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

I think that these three posts need to be read in conjunction with each other.

Even if there is really no correlation between any cost and final sticker price, not to mention sticker price and commodity cost, companies get away with increasing prices along with increasing commodity costs because they know that we THINK that they have to. If all consumers were educated, and everyone knew that there was little-to-no relationship, then they couldn't get away with raising prices for BS reasons. But if a luxury market consists of uneducated consumers who sympathize with rising corn costs, then the market can bear increased prices for no good reason. (Today's Moral: Education Is Important!)

So for the OP, my opinion is 'it shouldn't affect bourbon prices, but if producers think enough bourbon consumers are stupid, then it will.'

*I realize that I sound much angrier than I am. I am completely OK with pretty much all of this. My own cheapness/interests aside, I have no problem with bourbon producers charging what they can get for their product. I will add a few smiles to demonstrate my attitude.